Drive Products Income Fund

Drive Products Income Fund

May 15, 2009 13:58 ET

Drive Products Income Fund Reports 2009 First Quarter Financial Results

TORONTO, ONTARIO--(Marketwire - May 15, 2009) - Drive Products Income Fund (TSX:DPI.UN) today announced its 2009 first quarter financial results.

"The current recessionary period has put added pressure on sales as customers are demanding deeper discounts and competitors are reducing their prices in a desperate attempt to make a sale. This has led to a decline in sales in our core business. The Western branches are doubly challenged in that they are also coping with the continued declines in the oil and gas industry in Alberta," said Greg Edmonds, Chief Executive Officer. Sales decreased 5.2% to $22.9 million in the first quarter of 2009 compared to $24.2 million in the first quarter of 2008. Strong defence related sales from our Canadian and U.S. divisions were a highlight in the quarter as they were up $2.7 million or 87.3% from the comparable quarter in 2008. "While we continue to operate in difficult times, the acquisitions made in 2008 further diversified our industries and geographic regions and has allowed us to partially mitigate the declines in our core business".

Gross margins for the three month period ended March 31, 2009 were 31.4%, compared to 33.4% for the comparable 2008 period. Management is confident in its ability to source materials at competitive prices, but the pricing pressures noted above were largely responsible for the decrease in the gross margin. General and administrative expenses were up $0.2 million in the quarter, largely due to the new Toronto East facility which was opened in the fourth quarter of 2008. In addition, the Fund was not responsible for certain operating costs in the first quarter of 2008 with respect to one of its acquisitions. That complementary period ended in the second quarter of 2008 and the costs have been included ever since. During the quarter, layoffs in several departments were initiated and severance costs were incurred. The full cost savings of these layoffs will be seen in the upcoming quarters.

Net losses for the first quarter of 2009 were $0.9 million compared to $0.3 million in the comparable 2008 period. EBITDA in the first quarter of 2009 was $1.1 million, compared to $2.2 million in the first quarter of 2008. Net losses and EBITDA were largely affected by the reduction in sales and the erosion in the gross margins in the comparable periods.

Since the release of the Fund's 2008 Annual Report, the market outlook has continued to weaken and it has become even more difficult to forecast near term sales as a result. Management has been actively addressing these challenges by implementing several initiatives including employee layoffs, consolidating the two Calgary branches, wage and hiring freezes, significant bonus reductions, suspension of certain employee benefits, adjustments to budgeted 2009 capital spending and unfortunately, the suspension of the monthly distributions. In addition, management is exploring Federal government initiatives to reduce our employee compensation costs. Cost reduction initiatives and a closer monitoring of our working capital levels will remain a priority in the upcoming quarters. These measures are intended to conserve cash and improve the Fund's balance sheet.


($ thousands except per unit figures) Three months ended March 31
2009 2008 % change
(unaudited) (unaudited)
$ $
Sales 22,923 24,181 (5.2%)

Cost of Sales 15,728 16,096 (2.3%)
Gross Margin 7,195 8,085 (11.0%)

General and Administrative 5,894 5,729 2.9%
Foreign exchange 162 135 20.0%
EBITDA(1) 1,139 2,221 (48.7%)
Amortization 1,887 2,386 (20.9%)
Interest expense 134 89 50.6%
Current income tax provision 137 59 132.2%
Future income tax recovery (162) (4)
Net loss (857) (309) (177.3%)
Other comprehensive income 34 -
Net comprehensive loss (823) (309) (166.3%)

Average number of units
Outstanding ('000s)(2) 13,250 13,982
Basic and diluted earnings (loss)
per unit (0.065) (0.022)

Total assets 70,232 81,946
Long term liabilities 1,422 2,116
Distributions per unit 0.0626 0.1251

(1) EBITDA is a non-GAAP measure. See "Non-GAAP Measures" below for a
definition of EBITDA. The Fund's taxable earnings are allocated to its
unitholders and taxed in their hands.

(2) For purposes of calculating the average number of units outstanding,
Fund units and Class B LP units exchangeable for Fund units have been

First Quarter Interim Report

The Fund's First Quarter Interim Report is available on the Fund's website at and at

(1) Non-GAAP Measures

EBITDA and distributable cash are not earnings measures recognized by GAAP and do not have standardized meanings prescribed by GAAP. Therefore, EBITDA and distributable cash may not be comparable to similarly titled measures presented by other issuers. Investors are cautioned that EBITDA and distributable cash should not be construed as an alternative to net income or loss determined in accordance with GAAP as indicators of the Fund's performance or to cash flows from operating, investing and financing activities as measures of liquidity and cash flows. Management believes EBITDA and distributable cash are useful measures in evaluating the performance of the Fund and in determining whether to invest in units. EBITDA means net earnings adjusted to exclude income taxes, gains or losses on disposal of capital assets, amortization of capital assets and intangible assets, and interest expense. We have excluded impairments of goodwill and intangible assets in the presentation of EBITDA because we believe that such charges are non-recurring, one-time charges and that their exclusions will be useful to our investors to compare our period over period and year over year performance. Distributable cash means EBITDA adjusted for maintenance capital expenditures and other adjustments listed in the reconciliation provided in the annual Management's Discussion and Analysis.

About Drive Products Income Fund

Drive Products Income Fund holds a 52% indirect interest in Drive Products. Founded in 1983, Drive Products is a Canadian leader in the design and installation of systems solutions that transform a conventional new truck chassis into a specialized vehicle that meets a customer's technical and performance requirements. To achieve this, Drive Products offers a wide variety of products such as power take-offs, hydraulic pumps, motors and coolers, winches, cables and controls, drivelines, blowers and compressors, hoses and fittings, custom consoles, snowplows, spreaders and electronic spreader controls, from leading international manufacturers, in many instances as the sole distributor in Canada.

Forward-Looking Statements

This press release contains forward-looking statements relating to expected future events and financial and operating results of the Fund. These statements involve known and unknown risks and uncertainties. Actual results may differ materially from those anticipated by such forward-looking statements for a variety of reasons, including without limitation, market and general economic conditions and the risks and uncertainties detailed from time to time in the Fund's continuous disclosure documents filed with the Canadian securities regulatory authorities. The Fund disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.

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